Learn From Nortel’s Woes

Yesterday I spent a good deal of time filming my opinions on the latest news in the TMC Newsroom and didn’t get time to blog at all. Rest assured, I was sharing my opinions – but in this case on camera and not PC. Sadly it still takes time to produce videos so hopefully by today; all or most of this content will be available.

Perhaps the most shocking news I discussed yesterday is the Nortel bankruptcy exploration first reported by the Wall Street Journal. While Nortel has done an admirable job in the enterprise space, the service provider business is off a cliff and having 4.5 billion dollars of debt in this day and age is a severe liability to say the least.

Nortel has been marred by an accounting scandal and financial restatements in the past but in the last few years it seems things were turning around. I have had many conversations with the company’s enterprise division and Joel Hackney is doing a great job leading this part of the company.

The issue is the service provider market. I haven’t recently met with many people on this side of the business although I have requested such meetings on more than one occasion.

By not meeting with people on this side of the “house” I am now wondering in hindsight if part of the problems in the service provider business has to do with lack of leadership and the absence of a highly visible spokesperson/evangelist.

I have toured the many Nortel facilities over the years from Texas to Canada and am always impressed by the engineering going on inside the company.

But as we all know so well, engineering is important but doesn’t pay the bills… Sales do. This is why companies with less talented engineering teams but better marketing/branding teams always outproduce the best engineering companies.

This is especially true when your company is cash strapped and suffering from a financial scandal that has tarnished your reputation.

Sadly, we are learning now (as we do in every downturn) that branding, marketing and “perception augmentation” is something that needs to be done constantly. In good times and especially in bad.

In my experience the companies with steady branding initiatives do better over time. Sadly, today’s ADD driven executives and marketing leaders seem to think it makes sense to disappear from their customer’s radar screens from time to time.

Then they wonder why their sales drop off.

But getting back to Nortel. As bad as things are, there is a tremendous amount of value which can be unleashed. The Microsoft relationship for example gives them a tremendous advantage in the UC space.

If only Nortel had been able to describe to the industry that it is a communications leader across multiple segments of the market, I think it would be in a much better position.

If they could have just explained to carriers that they are uniquely qualified to power the next-generation of hosted UC solutions allowing service providers to reap huge SMB and enterprise cloud-based rewards, there is no telling how much better sales would have been across the whole company.

Then there are the synergies of being able to sell to carriers and enterprises at the same time – with the reduced development cost that comes with this approach. With this advantage, it is difficult to comprehend why the company isn’t doing better.

One is forced to wonder if the breadth of product lines across carrier and enterprise just makes it too difficult for companies with so many products to efficiently get the message out and more importantly manage the business well.

Obviously if you aren’t able to capitalize on these benefits,  you are not living up to the expectations of your shareholders and employees. Of course the blame always goes to the top and at this point it is unclear if company CEO Mike Zafirovski will step down and if anyone can even do a better job.

If the company does not enter bankruptcy however I would imagine Nortel wants to put someone in charge who really understands how important branding is. Because with all the negative news out there, creating a favorable impression of Nortel is going to be the most challenging job the company has ever had to undertake.

You may disagree with me and point to product development as the issue. I differ with this analysis as we know quite well Nortel can resell and repackage anything it wants and the Nortel brand and relationship has always been important to customers. An example of the company utilizing this approach is the relationship with Alvarion in WiMAX.

As I post this entry I am getting ready for a conference call with Nortel to discuss their virtual world initiatives which are really on the leading edge. (Yes I remember I mentioned virtual worlds may be dying) And to me, innovation without better monetization is the saddest part of this news… The company is really forward thinking in the tech space but it hasn’t been able to translate this into the large-scale growth to needs.

I have many talented friends at Nortel and they are some of the smartest people around. When I discuss Nortel’s problems with them, many of them will mention there are cultural issues which keep the company from doing better. Let’s hope these issues get dealt with rapidly as at this point it seems something huge has to change to allow the company to remain a viable, successful and standalone communications player.

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